CA Supreme Court Rules on Community Property in Bankruptcy

In this case, a California Supreme Court majority held:

When a married couple uses community funds to acquire property as joint tenants, is the joint tenancy deed alone sufficient to transmute the community character of the property into the separate property of the spouses? Family Code section 852 provides that for property acquired on or after January 1, 1985, a transmutation “is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.” (Fam. Code, § 852, subd. (a); see id., subd. (e).) We hold that under this rule, joint tenancy titling of property acquired by spouses using community funds on or after January 1, 1985 is not sufficient by itself to transmute community property into separate property. For joint tenancy property acquired between January 1, 1975 and December 31, 1984, the act of taking title as joint tenants is, in itself, insufficient to prove a transmutation; however, a court may consider the manner of taking title in determining whether the spouses had an oral agreement or common understanding. Finally, as noted, joint tenancy property acquired with community funds before January 1, 1975 is presumptively separate property.

As we elucidate below, “California’s treatment of joint tenancies has a long and tortuous history and is still the subject of considerable legal concern and disagreement.” (Blumberg, Community Property in California (1987) p. 157.) The Legislature may wish to examine whether current statutes are aligned with the expectations of married couples and third parties when spouses use community funds to acquire property as joint tenants. That said, we emphasize that nothing in our decision today precludes spouses from holding separate property as joint tenants or from transmuting community property into separate property held in joint tenancy as long as the applicable transmutation requirements are met. Nor does our opinion disturb the operation of the right of survivorship that typically accompanies joint tenancy title at death.

We answer the Ninth Circuit’s question as follows: Evidence Code section 662 does not apply to property acquired during marriage when it conflicts with Family Code section 760. For joint tenancy property acquired during marriage before 1975, each spouse’s interest is presumptively separate in character. (Fam. Code, § 803; Siberell, supra, 214 Cal. At p. 773.) For joint tenancy property acquired with community funds on or after January 1, 1975, the property is presumptively community in character. (Fam. Code, § 760.)

If such property was acquired before 1985, the parties can show a transmutation from community property to separate property by oral or written agreement or a common understanding. (Fam. Code, § 852, subd. (e); Estate of Blair, supra, 199 Cal.App.3d at p. 167.) Although a joint tenancy deed is insufficient to effect a transmutation, a court may consider the form of title in determining whether the parties had a common agreement or understanding under the pre-1985 rules. (See MacDonald, supra, 51 Cal. 3d at p. 270 & fn. 6.) For joint tenancy property acquired with community funds on or after January 1, 1985, a valid transmutation from community property to separate property requires a written declaration that expressly states that the character or ownership of the property is being changed. (Fam. Code, § 852, subd. (a); MacDonald, at p. 272). A joint tenancy deed, by itself, does not suffice.

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